Friday, March 7, 2014

The crisis in Crimea won’t keep President Barack Obama from forging
ahead with a weekend getaway with his wife and daughters in the Florida Keys...The vacation is Obama’s third of the year - The Washington Post - LINK

The U.S. and Russia are inching toward a serious confrontation over the U.S.-led coup of the Ukrainian Government and Russia's move to protect its interests in Crimea, millions of people in this country struggle to make ends meet and Barack and Joe decide to take their families on a warm-water vacation.

It doesn't really matter because Obama and Biden are nothing but figureheads who represent the extremely wealthy corporate and individual interests which paid for their election. Those are the real players behind the scenes. They use Obama to sign the Executive Orders which enact the policies designed to make the real players even richer - at the taxpayer's expense, of course.

Notice how Biden has been mysteriously silent on the Ukraine situation? The White House can't afford the risk that Biden says something completely stupid, or "off-teleprompter," so I'm sure he was instructed to disappear. Obama has volunteered to stay away from Democratic incumbent campaigns because of his poor approval ratings, so he's pretty much dead weight until his term expires.

I guess the only problem I have with letting Obama and Biden go on perma-vacation is that the wealthy elitists should be funding their vacations and not the taxpayers.

The US economy remains in recession. And once the truth breaks out,
the stock market will slip into crash mode. The stock market is up on
Fed manipulations, and the economy is up on lies and propaganda. It’s a
poisonous combination - Richard Russell, King World News LINK

I encourage everyone to read that brief interview with Richard Russell.

As I discussed yesterday, we know the Government is lying through its teeth to us about the Ukraine situation. It's amazing how quickly CNN and Fox News seem to have misplaced the Victoria Nuland phone tape discussing the $5 billion the U.S. has "invested" to foment the unrest over there. You know, the one in which she says "F_CK the EU." Both CNN and Fox are disseminating nothing but the lies being promoted by Obama/Kerry etc without researching or reporting on the actual facts. Kind of ironic that CNN backs the Obama regime's backing of the neo-Nazis who have taken control of western Ukraine (I'm not surprised that Fox News supports this).

The Government also lies about the employment situation in this country. We saw the most recent example today with the Bureau of Labor Statistics monthly employment report claiming that the economy generated 175,000 jobs in February. I don't want to go through a detailed analysis of the data as reported and the obvious statistical manipulation implemented on that data. The real issue is the legitimacy of the data itself. This requires thinking about the data as presented in the context of every other business data report that was released during February, especially the reports from the private sector.

As one example, the BLS claims that the construction industry added a total of 55,000 jobs in January and February. Yet, we know from homebuilder reports that housing starts have been tanking. And what about the "bad weather" narrative. If housing starts declined over the period and bad weather prevented this, how on earth is it possible that profit-seeking businesses hired workers? Does anyone really think that a homebuilder executive, who is trying to keep his stock price elevated so he can unload as many shares as possible (see the recent S-4 SEC stock transaction filings - homebuilder execs dumped shares in February), would spend money hiring workers who don't have to work?

That's just one line item example. There are several. The point here is that if you look at the numbers being reported - regardless of how they are manipulated to paint a positive picture - in the context of everything else that has been reported about the economy, there's no possible way that the economy generated job growth in February. In fact, the ill-reputed "birth/death" model, which everyone understands is used as "plug" number the Government uses to pad the employment data, explains 125,000 of the 175,000 jobs reported. The birth/death model has been dissected and shown to be a complete fraud ad nauseum.

The smart money must understand this, because the S&P 500 futures gapped up nearly 10 points when the number hit the tape. It's currently trading down 3 points, 13 points lower than the initial buying orgy. The real damage was inflicted by the banks who manipulate the gold and silver market. Instantaneously as the report hit the newswires, gold was demolished for a total of $25 before recovering some of the manipulated damage. Right at the time the report was released, nearly 8,000 gold contracts were unloaded on the Comex.. To put this into context, in the 14 hours and 20 minutes of Comex gold futures trading that occurred from 6 p.m. the previous evening until the 8:30 a.m. Comex open today, the total volume was roughly 45 contracts per minute. You decide if the 8,000 contracts dumped at 8:30 a.m. was legitimate selling or motivated Fed/Govt manipulation

The most frightening part about all of this the fact that the Government finds it acceptable to lie to us about everything. The U.S. Government has become as corrupted and self-serving as was the old U.S.S.R Government that many of us grew up fearing. The lack of fear about what has happened in our own backyard is truly stunning.

Thursday, March 6, 2014

[Secretary of State, John ] Kerry, wallowing in his arrogance, hubris, and evil, has issued direct
threats to Russia. The Russian foreign minister has dismissed Kerry’s
threats as “unacceptable.” The stage is set for war. - Paul Craig Roberts

Before I elaborate on the above a quote with a few salient passages from PCR's brilliant analysis and commentary on the situation in Ukraine, I want to clarify for anyone reading this that the U.S. has funded and militarily supported a political regime in western Ukraine that has ingrained political and military roots with Hitler's Nazi Party. This is an undisputable fact. If you decide to fall for the Orwellian rhetoric flooding all of the U.S. news outlets, you are doing so out of complete ignorance of the facts.

Kerry has no answer to the question: “Since when does the United States
government genuinely subscribe and defend the concept of sovereignty
and territorial integrity?”

In working with Dr. Roberts on several collaborative articles about the U.S. Government's long term and massive intervention in the gold market, I have come to appreciate the deep insight and understanding he has for what is really happening behind "the curtain" in DC. His ability to communicate and elucidate this reality is nothing short of brilliant.

Washington wants missile bases in Ukraine in order to degrade Russia’s
nuclear deterrent, thus reducing Russia’s ability to resist US hegemony.
Only three countries stand in the way of Washington’s hegemony over
the world, Russia, China, and Iran.

His latest article on the truth about what is happening in Ukraine and why the U.S. has fomented political and civil chaos over there is a must-read for anyone who seeks the truth.

Everyone needs to understand that Washington is lying about Ukraine just
as Washington lied about Saddam Hussein and weapons of mass destruction
in Iraq, just as Washington lied about Iranian nukes, just as
Washington lied about Syrian president Assad using chemical weapons,
just as Washington lied about Afghanistan, Libya, NSA spying, torture.
What hasn’t Washington lied about?

If you are confused about the facts, please educate yourself with this article from geopolitical and economic analyst, William Engdahal: The [U.S.] Rape of Ukraine

Keep in mind that throughout history, the most definitive sign that a great Empire is in the latter stages of collapse is wantonly corrupted and reckless imperialism - of which we've seen many examples since Bush and Obama took office.

Tuesday, March 4, 2014

In a mainstream media disclosure that
took the gold investment world by surprise, Bloomberg published a
report - Article Link - last week which contained data from an academic study that
showed that the daily London gold price fixing has been manipulated
for at least 10 years. While this is not new information to many
precious metals investors, it is the first time that an establishment
news outlet has exposed the truth about the widespread and blatant Government-sponsored
manipulation of the precious metals market. It should be noted that the Financial Times also published this report but then retracted and deleted the article.

The London daily gold fix is an event
that has been setting the price of gold twice a day since 1919. With
the advent of computerized market trading and the gold/silver futures
market (1974), it would appear that the London fix is no longer
necessary as a mechanism of "price discovery." As we will
see, the London fix still exists because it is used by the bullion
banks as an overt market manipulation mechanism.

The price "fixing" is
conducted by 5 individuals who work for their respective bullion
banks. These individuals jointly decide what the
"spot" price of gold should be twice a day, once in the
morning and once in the afternoon (London time). They committee is
allowed to communicate with market participants and their respective
banks are permitted to continue trading gold and gold derivatives
while these individuals decide what the price of gold should be. Theoretically this price as "fixed" is determined to be the price which will clear the market of all buy and sell orders up to that point. Theoretically, it provides a "benchmark" price for the spot price of gold. Incredibly, the time of fix occurs during the period of time when the Shanghai Gold Exchange, the largest physical gold market in the world, is closed for the day.

But how can a closed system like this
possibly operate objectively? The gold fix system is inherently
ingrained with the conflict of interest and moral hazard the accompanies
any system governed by collective "judgment." The
Bloomberg News article details a study done by NYU
professors which showed that between 2004 and 2013 large price moves
during the afternoon "fix" were moves lower at least 66% of the
time. In 2010, the large moves were negative 92% of the time.

From their work, the authors concluded
that the market in all probability was manipulated by the banks whose
representatives establish the price fix every day: "There’s
no obvious explanation as to why the patterns began in 2004, why they
were more prevalent in the afternoon fixing, and why price moves
tended to be downwards" - Rosa Abrantes-Metz, one of the
authors of the study.

As it turns out, Ross Norman, CEO of
the well-known London-based Sharps Pixley bullion retailer issued a
rebuttal to the Bloomberg article and in defense of the London fix (LINK).
Ironically, in his attempted defense of the gold fix process, Norman
inadvertently exposes the system's inherent flaws, thereby showing
the reader how the London fix committee can easily manipulate the
market. In fact nearly every point of assertion about, and defense of, the London fix process is embedded with
half-truths or outright lies.

In response to the fact that there are
unusually large moves during the "fix" period, Norman
explains: "the fix is a price discovery process and as such large
buying and selling orders collide here - large moves are therefore to
be expected. In fact, the mere fact that it does move confirms some
differences in opinion over fair value between the clients dealing in
the fix - actually it supports the notion of the integrity of the
process."

This explanation is is patently
disingenuous. Gold trades in either physical form or derivatives
form (futures, forward) nearly continuously during the trading week.
The "price discovery" process occurs inherently with every
buy/sell transaction. To say that it is only at the time around the
p.m. London fix that large orders to buy and sell constitute "price
discovery" is entirely misleading. In a continuously functioning
market, orders of all sizes are executed and "price discovery"
occurs with each trade execution. A committee of five individuals is
not needed and collective "judgment" about what the price
should be is not required.

In his second point of defense of the
London fix, Norman makes these comments: "the fix is used by
official institutions (like Central Banks) and many major miners who
all require an "objective" and published price because they
need to [be] more accountable than say (sic) a proprietary trader.
The spot price for example is neither of objective (sic) nor
published. Selling by miners in size every day and invariably
outweighs (sic) any official buying which is typically large but
infrequent. Hedging or financing for the miners have will often (sic)
link their financial arrangements to the gold fix."

Just as a note, it's interesting that
Norman decided to put quotes around the word "objective."
Clearly the London fix is anything but "objective," since
by it's very nature it defies the objectivity and price discovery
mechanism of a continuously functioning market. I'm not sure why a
"fixed" price needs to be "published" at all. At any given time during the 23 hour trading period of each
business day gold trades in either physical or derivative form
(futures, forwards). Anyone can go online and "discover"
the current trading price of gold.

To be perfectly clear about this, any
price which is determined in the market by a buyer and seller is
inherently more objective and visible than is a price which is
"fixed" by a committee of five individuals saddled with
inherent conflict of interest. Mining companies and Central Banks
are free to use the standard market mechanisms to execute their
trades. To say that a committee operating out of view of the market
can determine an official "spot" price is either
unintentionally disingenuous or an outright lie. If
anything, the London fix process prevents the
true price discovery process of an open and free market.

Norman also claims the London fix conference
call is not private and is open to clients. Do you have access to
this call? Our firm does not. I don't know of anyone who has
access to this call. While the price fix committee of five may have
information about the large buy and sell orders that are about to
"collide" - to use Norman's term - the market as a whole
does not. An efficient market functions most efficiently in its
price discovery process when as much information as possible about
buyers, sellers and size is immediately disseminated to the entire
market. The London price fix system not only prohibits the
dissemination of information that might help the market achieve its
price discovery goals, it leaves the discretion as to the "best"
market clearing price at that point in time up to the committee of
five who may or may not be on the phone with their best preferred LBMA
member clients or their own banks.

Again, to reemphasize this point
because it can not be emphasized enough, the price fix committee
members have de facto conflict of interest by the very fact that the
banks they work for have large capital positions in gold and silver.
Furthermore, while detailed LBMA position data is not made available to the
public, we know that these banks run large net short positions on the
NY Comex. To say the least, the banks have a motivated interest to
see a lower price fix every day.

Norman next tries to defend against
the findings of the study that the price of gold at time of the p.m.
fix is fixed lower a majority of the time - with the statistical
evidence overwhelmingly in support of this conclusion - by explaining
that if London gold dealers (i.e. the bullion banks) "had
consistently shorted gold as maintained" they would have
suffered massive losses.

This assertion is absurd because it
assumes that the big bullion banks are always long gold. Yet, we
know from over a decade of Comex data that the big bullion banks have
run massive short positions in Comex gold futures. We don't know
whether the big banks are net long or net short on the LBMA because
the LBMA does not publish enough information about the big bank forward
contract and bullion positions. In fact, from the size of the
historical net short position of the big banks on the Comex, and the
accompanying trading turnover of these positions, any bank with
access to information about the level of the price fix before the
general market sees it has the ability to net rapid and riskless
trading gains on a daily basis.

Finally, Norman tries to deflect the
issue entirely by opining on the "vested interest" of
Bloomberg in publishing this article and ends by scolding the organization ("shame on you...for lack of journalistic
discretion and judgment...and failure to ask the right questions").

As Norman tolls this bell of scorn and
disdain for Bloomberg News, ironically he's ringing it at himself, as
Norman's disingenuous defense of the LBMA gold price fix
surreptitiously exposes the reasons why the gold fix process is
highly flawed. Indeed, it is a system of price determination which
is susceptible to the moral hazard and market misconduct which
accompany any market system in which price level is determined by a
small committee individuals, all of whom have a high level of
inherent conflict of interest.

One last point, Norman is correct that
Bloomberg fails to ask the right questions. Here's a small sampling
of the right questions: 1) Given that the gold market trades nearly
continuously during the business week, either by auction or computer,
why is the London fix needed at all? 2) Why does the fix occur after the Shanghai Gold Exchange, the worlds largest physical bullion market, has closed for the day? 3) Why are the members of the
price fix committee allowed to be representatives of the big bullion
banks? 4) if #2 is unavoidable, shouldn't the members be from
organizations which do not run capital positions in gold and silver
or stand to benefit from inside knowledge about the price fix? 5)
Why doesn't the LBMA publish more specific and detailed data about
the forward contract and bullion positions of its member banks?

"We hold a decent amount of treasury bonds – more than $200 billion –
and if the United States dares to freeze accounts of Russian businesses
and citizens, we can no longer view America as a reliable partner,” he
said. “We will encourage everybody to dump US Treasury bonds, get rid of
dollars as an unreliable currency and leave the US market."

Many of us have been wondering when one the of the large holders of U.S. Treasuries was going to brandish a freshly sharpened sword and threaten to swing it at the Achilles' Heel of the United States.
The quote above is from an advisor to Putin in response the the threat of the U.S. implementing economic sanctions against Russia. You can read the article from a Russian newspaper here: (sourced from Zerohedge) LINK

While I highly doubt that Russia will actually dump Treasuries as a form of financial war against the U.S. - at least this time - the Putin advisor just made it clear that several powerful countries, with interests that often conflict with U.S. imperialistic behavior, hold a weapon of defense that is the equivalent of a financial nuclear bomb.

What's most fascinating about watching the Ukraine events unfold is the shamelessness with which the U.S. attempts to impose its will on Russia for defending its own interests, and yet the U.S. wantonly goes into countries like Iraq and Libya, assassinates the leader, overthrows the Government and installs its own puppet. It's truly amazing, if not utterly Orwellian, the way in which the major U.S. media outlets have conveniently forgotten about the Victoria Nuland tape that Russia released discussing the U.S. role in destabilizing Ukraine in the first place.

The biggest problem for the U.S. is that, despite the progressively fraudulent Government reports to the contrary, the U.S is spending far more everyday to keep the lights on than it takes in to cover those expenses. Watch this year as the spending deficit increases dramatically. We'll soon understand why the Obama Government pushed so hard to remove entirely the debt ceiling limit.

Unfortunately, it is becoming increasingly apparent to anyone who examines the facts which belie U.S. Government pomp and circumstance that, short of unleashing nuclear weapons, the U.S. is only capable of bringing knives to a gunfight.

Friday, February 28, 2014

But the most brilliant propagandist technique will yield no success
unless one fundamental principle is borne in mind constantly and with
unflagging attention. It must confine itself to a few points and repeat
them over and over. Here, as so often in this world, persistence is the
first and most important requirement for success. - Adolph Hitler, "Mein Kampf"

Seriously, is National Association of Realtors chief economist, Larry Yun, trying to make a joke out of using the "bad weather" excuse for poor housing market sales?

As I have shown repeatedly, the poor housing market sales results are a direct result, for many fundamental reasons, of the demand-side of the market falling away. In fact, RealtyTrac just released a report yesterday that showed institutional investor purchases of homes fell to its lowest level in January since March 2012: LINK That has nothing to do with the weather in any part of the country.

However, I have provided links in previous articles that show that, on average across the country, the weather during January was about the same as it has been over the last 10 years. In fact, in California it was warmer than normal.

So why is Larry Yun insistent upon shoving the "bad weather" narrative down our throats every time the NAR releases a negative housing market report. For instance, just today, the NAR released its Pending Home Sales index for January. It actually showed a slight uptick for January from December but was below what was expected by analysts. So what does Larry have to say: "Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping" (LINK).

Well, let's cut to the chase. What really happened according the NAR data? For sake of simplicity, here's a graphic pictorial of the distribution of the NAR data for January from Zerohedge:

(click on graph to enlarge)

Now, from what we know about the weather patterns across the country, California/the West was warmer than normal, the Northeast and the South were about average with a few extreme bad weather days and the Midwest was also about average with some unusually cold days sprinkled in.

So how come the biggest drop in pending home sales occurred in the area where the weather was warmer than usual and the areas that might have been affected by the weather show gains for January?

The only conclusion I can draw is one of three possibilities: 1) Larry is tragically stupid; 2) Larry is a pathological liar; or 3) Larry is making a joke out of the fact that the housing market is beginning to collapse.

Larry, if you happen to see this, please either leave a comment or respond with your explanation to my email as to why your statement about the weather is so obviously wrong. I encourage everyone to send this blog post to the NAR and maybe they can issue an explanation other than putting out the above blueprint from "Mein Kampf."

Anyone who denies that the Fed is engaging in unprecedented intervention in all of the markets - especially the gold and silver markets - is guilty of either ignorance or willfully intentional denial. But the Chinese can play the intervention game as well. We are seeing that giant footprint of intervention in the dollar/yuan relationship, as the Chinese yuan has just experienced it biggest weekly plunge ever:

Briefly, this graph (edits in white/red are mine) shows the $/yuan relationship. It plots the amount of Chinese yuan needed to buy one U.S. dollar. When the ratio declines, it means the yuan is increasing in value vs. the dollar. As you can see, there has been a steady decline in the $/yuan ratio, which means that Chinese Government has been letting the yuan rise in value. That is, until about a week ago.

What most market observers tend to overlook is that there are likely $10's of billions worth of OTC derivatives that have been issued by the big Too Big To Fail banks tied to the trading relationship between the $/yuan. In fact, Morgan Stanley estimates the amount to be at least $150 billion: $/yuan Derivatives Bomb Detonated?. They also show a table in that link which estimates possible losses to the banks if this is the case to be well in excess of $1 billion. Morgan Stanley should know, it was one of the biggest beneficiaries of the 2008-2009 Bush/Obama bailout of Wall Street. MS also has one of the highest net exposures as a percent of bank capital to derivatives accidents.

In my view, that spike up in the $/yuan you see in the chart above has probably triggered a massive derivatives "explosion" because typically, in their keen foresight and wisdom, the bank rocket scientists never account for the risk of a big move like the one above in a such a short period of time. If they were to price in this possibility, the derivatives contracts upon which they make $10's of millions in selling profits would be too expensive and the banks would miss out on that easy income. But hey, we haven't seen a move like that in the history of the $/yuan contract so why should the banks ever expect it to happen? And the Fed and Government has their back if they're wrong.

Of course, this was same Nobel Prize winning wisdom that cause the Long Term Capital collapse and bailout (remember that one?) and that caused - more catastrophically - the 2008 collapse of the U.S. financial system (AIG/Goldman) and the subsequent joint Republican/Democrat 100% approved taxpayer bailout.

Many analysts are wondering why the Chinese Government, which has a tight control over the trading level of the $/yuan, has enabled the above spike up to occur. If you think about the ramifications of what I just laid out above, it leads to one possibility (hint: think about the big blow that was just delivered to western bank balance sheets if I'm right about a behind the scenes derivatives accident having just occurred).

I see this as another big cruise missile just fired by China in the global currency war. The first big missile being the massive accumulation of gold by the Chinese (as has been documented ad nauseum). There's also another benefit to the Chinese. Think about the massive size of China's dollar reserves. The dollar has just become significantly more valuable vs. the yuan and so has the value of China's dollar reserves. This gives China more buying power to buy gold using dollars.

One other point, and this is tied to China's ultimate goal: to unload its massive hoard of dollar reserves while making as little noise about it as possible. Last night, a few hours after the yuan dropped precipitously against the dollar, the US dollar index (the yuan is not part of the dollar index) plunged in cliff-dive fashion, losing 36 basis points in about 30 minutes. While that may not sound significant, in currency trading terms that is considered to be a mini-crash. Oh, it also dropped below key 80 line of support that has been drawn in the sand by the U.S Government, slicing through that level with ease.

I would suggest, and there's no way of telling without having access to the inside books - the books which contain the numbers for which the banks spend millions to make sure Congress helps the banks keep them hidden - that the Chinese have unloaded another truckload of dollars behind the all the smoke emanating from the holes created by the Chinese Government motivated $/yuan crash and the related derivatives explosions:

The greatest trick the devil ever pulled was convincing the world he didn't exist.

Thursday, February 27, 2014

Any America who doesn't watch this video clip from Moyers & Company (Bill Moyer) has no business voting. Everyone who does watch it will understand why I have not voted since 1992. There will be no hope for change for until the citizens of this country hold the Government accountable.

President Obama can liquidate American citizens without due processes, detain prisoners indefinitely without charge, conduct dragnet surveillance on the American people without judicial warrant and engage in unprecedented — at least since the McCarthy era — witch hunts against federal employees (the so-called “Insider Threat Program”). Within the United States, this power is characterized by massive displays of intimidating force by militarized federal, state and local law enforcement. Abroad, President Obama can start wars at will and engage in virtually any other activity whatsoever without so much as a by-your-leave from Congress, such as arranging the forced landing of a plane carrying a sovereign head of state over foreign territory.

Wednesday, February 26, 2014

The Census Bureau released its new home sales report for January today. It showed nearly a 10% increase in sales from December to January and an increase over January 2013. The only problem with this report is that it has holes in the numbers that are wider than the Mariana Trench is deep.

To begin with, please keep in mind that the headline numbers reflect a seasonally adjusted annualized rate (SAAR). This means that the numbers collected by the Census Bureau are fed into a statistical model that spits out a result and we have no idea whatsoever how the result was calculated. This is common across all Government economic reports and results in a high degree of reporting errors and bias to the upside, especially when a rising trend is followed by declining trend, such as is the case with the current housing market.

Instead of looking at the SAAR, it's more useful for analyzing the data by looking at the unadjusted monthly data, which is included in the Govt report - LINK - but never reported by the media or discussed by Wall Street analysts. As I'll show, it is this aspect of the data that is an inconvenient truth and I suspect it will eventually be removed from the report, just like the Fed removed M3 from its reports.

If you look at the link, you'll see that in January a total of 34,000 homes were preliminarily estimated to have been "sold." I say "sold" because the Census Bureau records a sale when a contract is signed - not when a home is delivered, escrow clears and title is transferred. Currently most big homebuilders are reporting a 25% cancellation rate on homes "sold." If we apply this rate to the 34k number, we get 26k (rounding up) as the actual number of homes that might eventually be delivered and constitute a real sale, or cash generating economic event. If we annualize this number, we get an annualized sales rate based on January's contract signings + likely cancellations of 312,000. Note that this varies significantly from the 468k SAAR reported by the Govt.

Even if I give the numbers the benefit of seasonality, there's no way a number which is based on January's contract signings and includes cancellations would come anywhere near 400k. One more important point of note. When a contract "sale" as reported by the Govt is cancelled, the Govt does not subtract this from previous "sales" reports. From the Census Bureau site: "The Census Bureau does not make adjustments to the new home sales figures to account for cancellations of sales contracts"(LINK). You'll also note that, as I stated above, the Govt admits that when the market is declining this report and the methodology used overstates the results. This is what is happening now.
A second source of fraud/incompetence is that the reported increase of sales for January is completely inconsistent with the mortgage purchase application data released weekly by the Mortgage Bankers Association. Since the early fall of 2013, this report has been showing a decline almost every week. Since 2014 began, it's been showing double digit year over year declines almost every week. Now, we know from this data - (LINK) - that mortgages are used in close to 95% of all new home purchases. January 2013 to January 2014 showed a double digit decline in mortgage purchase applications. Same for December. How is it possible that new home sales increased 10% from December to January and 2% from January this year from January 2013?

It has been suggested that perhaps investors started buying new homes to rent out. While it is possible, that theory is entirely inconsistent with the rate of return model being used by these investors, who require the low cost basis of distressed homes to make their ROR models work. New homes are significantly more expensive than a distressed home, or even non-distressed existing homes, and therefore it is highly improbable that investors are flocking to buy new homes.

Instead, it would appear that the Government report is seeded in fraud or incompetence. One last point, we've have had the "bad weather" narrative shoved in our face ad nauseum with every economic report that is showing weakness during January. However, you'll note that the Government is reporting that the northeast and the south - the two regions which were hit with several bad weather days in January - are both registering increase home "sales" for January over December.

How is it possible that consumers in both the northeast and south decided to stay home in January and not spend money on anything except a new home? Are they buying these homes from Amazon.com and Ebay? By the way, online sales tanked hard in January too. The answer is: fraudulent or incompetent reporting.

Tuesday, February 25, 2014

If you want to get rich, don't bother inventing something to advance
humanity, move to DC and go to work for a lobbying firm or Government
contractor.

This is an interesting exposè of the 25 richest neighborhoods in America. While many of the 'hoods that make the list are associated with America's former industrial wealth, three of the top five are bedroom communities of Washington, DC.

Having spent several months living in Georgetown in 2004, I can vividly recall that everywhere you went went within a 10-15 mile ring around Capitol Hill, the only thing you could "smell" was taxpayer largesse. What a sad statement about this country...

Monday, February 24, 2014

Harold Ramis passed today. Included in his epic body of a work as a writer, director, producer and actor is "Animal House," which in my view is the funniest movie ever made ("Trading Places" may share that spot for me).

"Animal House" ignited the re-birth and proliferation of frat house participation and culture on college campuses across the country, which had started to die out during the "counter-culture/social revolution" movement that swept the nation starting in the mid-1960's.

The 1970's are an important period of time for me not only because that was the period of my teen years, but also because - upon reflecting back - it was probably the last window of opportunity for the citizens and progressive politicians (Gary Hart and Tim Wirth, for instance) to save our system.

After the revelations of Watergate, there was a chance to burn the system down and rebuild it from the ground up and make the adjustments to the legal structure required to prevent the build-up of the systemic rot and decay which had accumulated over the previous 200 years.

But instead, Nixon was pardoned and the elites seized and began to implement the extreme power and control that accompanied the possession of the world's reserve currency in pure fiat form. This enabled the business and political elites to hasten the erosion of The Bill of Rights and obliterate the check and balance system of power separation that was fundamental to our democracy.

Notwithstanding the appalling failures of every post-Nixon President leading up to the present, currently we are stuck with a man who promised hope and change - to do his best to restore Rule of Law. Instead, we have a President who has dedicated his first six years to advancing the despotic powers that have accumulated into the Executive Branch of Government and has shepherded our county further down the path of systemic destruction and totalitarianism.

"Animal House" is symbolic of both the rebellious spirit that had proliferated American culture during the 1970's but also of this country's transition into a system of pathological social order and behavioral control.

Gone forever is the "question authority" spirit upon which this country was founded.

Friday, February 21, 2014

The price of gold and silver will both hit new highs in 2014. The price of gold goes north of $2,000, and silver will quickly go over $50. When it does, it will get a little crazy. – Eric Sprott, Sprott Investment Management - SilverDoctors.com

A reader the other day was inquiring about the gold/silver ratio (GSR). The GSR is an interesting metric that converts the price of gold and silver into the number of ounces of silver it would take to buy one ounce of gold. Over the entire course of history, that I know of, the GSR has been as low as 8, which was the fixed ratio used by the Roman Empire for exchanging gold and silver.

Interestingly – at least to me – if you look at the GSR over the last 350 years, it held steady at around 15 until the middle/late 1800′s. At that point in time it rose steadily as the gold standard was slowly eroded by United States. President Lincoln was actually the first President to disconnect gold and silver as the Constitutionally mandated currency when he allowed someone to use Government-issued bonds to settle a debt obligation (the action was later upheld by the Supreme Court under President Grant).

At any rate, to cut to the chase, since the Federal Reserve was founded, the GSR has ranged from 15 to 100. The low-end of the range usually correlates with bull market tops in gold/silver and vice versa with the high-end.

I don’t know if the next big move higher that I believe is coming will be the final stage of the precious metals bull market, but I do think that based on the extraordinary supply/demand fundamentals for gold that the next move will be big for gold and spectacular for silver.

Thursday, February 20, 2014

Inventory rose year-over-year in 22 of the nation's 35 largest metro areas covered by Zillow, with the largest inventory gains coming in some of the areas that were hit hardest by the housing recession, including Las Vegas (up 42.8 percent), Phoenix (up 30.5 percent) and Sacramento (up 26 percent). These metros also experienced significant cooling in the pace of home value appreciation in January, as buyers had more homes to choose from and were less apt to engage in the kinds of bidding wars that helped drive prices up so quickly last year.

I have been suggesting that we would start to see a lot more homes for sale starting in January, as home buyers who are theoretically now even or "above water" on their mortgage after paying too much before the bubble popped look to sell and move on, with less debt.

I can say anecdotally that I'm seeing "for sale" signs pop up like weeds every day now, as I drive pretty much the same routes throughout central and south-central Denver regularly. I'm also seeing more "coming soon" signs. Back in 2007/8 when I noticed these, I assumed the was house not for sale yet. It is, however, for sale but it is not officially listed. The "coming soon" sign means the broker has an exclusive, albeit usually short term, selling agreement - a "hip pocket listing," as it's called. The house is for sale but it's not listed in the MLS system and therefore does not show up in the National Association of Realtors "inventory" metric. The latter of which actually lags the market by 2-3 months anyway.

Let's say in any given market that maybe 5-10% of all homes sport the "coming soon" brand. That means that at any given time the actual inventory of homes for sale is 5-10% higher than is being officially reported or being represented by your most helpful home salesman. Just one more source of fraudulent data that has infected our entire system.

I suspect that anxious buyer demand for homes was "pulled forward" into 2013. The anxiety stemming from the "low inventory" narrative, from the new FHA mortgage rules this year which make getting an FHA mortgage (20% of all mortgages) more restrictive/lower size limits and from fear of higher interest rates. In other words, this rising inventory will be met by significantly reduced demand from both "organic" buyers and investment buyers. As I pointed out in my articles over the last three months, we saw evidence of a decline in both buyer cohorts in the last quarter of 2013.

Wednesday, February 19, 2014

"I live in ground zero of the real estate bubble in Arizona and my wife
is a real estate agent. She works with a flipper and none of their
properties are moving, not even getting offers. With winter snowbirds
here this is the strongest time of the year for real estate and nothing
is moving. Her investors have been dumping their prices and are starting
to panic. "Just get rid of it" is becoming the mantra. The MLS listings
have been increasing every month for three months and sales are
declining. I think its about to shit the bed again." - from a comment posted on today's earlier post.

When you look at the quote - and the source of that quote - it's amazing how similar the political, banking and media machinery in this country has assimilated the characteristics of the old Russia that we were taught to despise in the 1970's U.S. educational system. I guess time is a flat circle. Everything ever done in this world will be done again, over and over.

The big lie being told to the public right now is that the housing market is in a miraculous recovery, that inventories are extremely tight and that now is the best time to "invest" in a new home. Of course, if that were true, why are homebuilder insiders unloading their company shares in epic quantities?

January home sales in Southern California were their slowest in three years: LINK The "bad weather" lies do not work there because SoCal was warmer than normal in January. How about the truth: the housing market is back in its bear market trend.

The narrative that has been carefully spun around the housing fairy tale is full of lies. Sure, the way the National Association of Realtors reports inventory makes it appear as if listings are low right now. Look around your area and make note of the number of "coming soon" signs you see. They're all over Denver. A couple homes in my immediate area have been "coming soon" since before Christmas. Did you know that a "coming soon" home is actually on the market but not officially listed in the MLS. That "coming soon" home is thus not counted in the NAR's inventory. But it's for sale.

And the big banks have been withholding a large portion of homes they have foreclosed on over the past 4 years. They can do this because the Fed's QE has injected $2.5 trillion in cash onto their balance sheets. The homes will soon hit the market, as foreclosures are spiking up again. If you scan through enough homebuilder 10-Q's, you'll see that homebuilder inventories have seriously ballooned over the last year. inventory is significantly higher than propaganda is reporting. And if you read my series of articles on the housing market over the past 3-4 months, you'll see the real data showing sales falling at an accelerating rate month the month and that prices are quickly dropping.

We saw even more evidence that the housing market is starting to fall apart today. Housing starts - which in and of itself is a dubious indicator of housing market vitality - once again spiked lower and was well below the expectations of Wall Street's "brain trust" aka snake oil salesmen. And the weekly index of mortgage purchase application took another big tumble this week, falling to 19 year lows and down 17% year over year. Mortgages, by the way, are the life blood of home sales. If applications to purchase homes are plummeting, so is true demand.

As I outline in this article published this morning, the housing market is in big trouble: Look out below!

If you are thinking about buying a home because you think the time is right, wait for 6 months. Not only will you have a huge selection of choices but prices will be significantly lower. If you want to sell your house because you understand the nature of the big lie being told, get it listed now and price it to move.

Tuesday, February 18, 2014

First, a little humor for the day. The Hong Kong Gold Exchange is going to build a 1500 tonne vault in China: LINK The rumor in my office is that Janet Yellen has decided that because of all of the bad weather in New York this year, she is going to use that vault to move Germnay's 1500 tonnes into a more weather-friendly environment...

Homebuilder sentiment collapses the most on record in one month, mortgage applications drop to a 19yr low (reported last Wed).

Then there's this string of reports:

- the TIC report shows China reduced its U.S. Treasury holdings in December by the 2nd largest
amount ever
- Student loans hit a record $1.08 trillion in December, delinquencies on this debt hit all time high
- social unrest in Venezuela, violence and deployment of military in Ukraine, bank runs in Thailand
- well-paid bankers, especially JPM bankers, dropping dead with no explanation

Reminds me of the "coup de gras" systemic collapse chapter in "Atlas Shrugged." It's going to get ugly this year...

Friday, February 14, 2014

Let’s put this into perspective. When did anyone in the mainstream media say gold was a great investment? What you are hearing is a huge bias not borne out by the facts. - Robert Wiedemer, "100% Fake Recovery" LINK

Gold has been the best performing asset since the Fed tapering began on December 18th, 2013. Most analysts were, and many still are, calling for gold to hit $875 this year. How they arrived at that conclusion is beyond rational comprehension, given that if gold stayed below $1200 for any length of time most gold mines would be shuttered. Moreover, almost every bearish Wall Street analyst never even considers the enormous amount of gold being accumulated by China. I don't understand how these people can call themselves professionals when they are ignoring two obviously fundamental variables affecting the price of gold.

As we know, belief without evidence is nothing but faith. It would seem to me that Wall Street is exercising bad faith in their assessment of the gold market.

At any rate, the fact and evidence stands that gold has been outperforming everything since mid-December. One reason for this is that the Fed and the bullion banks have been forced by the sheer size of the demand from Asia to "retreat" from the unprecedented manipulation of the price of gold over the last 2 years. The reason for the "retreat" is to let the price of gold rise in an attempt to slow down the massive demand for physical gold.

But there are several fundamental reasons that investors now perceive gold to be undervalued, especially relative to the U.S. stock market. First, there's no question now that the U.S. economy is rapidly slowing down. Auto, retail and home sales are declining and it's becoming clear that the cold weather/dog ate my homework excuse is not cutting it. Again, when you look at data available that Wall Street and CNBC conveniently overlook, it's pretty obvious that the majority of Americans are cash strapped, have piled on new debt and are living from hand to mouth. I doubt 99%'ers are going to be rushing out this year to buy a new Lennar home and a shiny BMW for the driveway.

Because of this, it is probable that Janet Yellen will have to reverse the taper and start printing even more money than the $65 billion/month being printed after the first two tapers. Let's not forget, taper or not, the Fed is still printing at a rate of $780 billion per year. In addition, assuming Stanley Fisher is confirmed as Yellen's partner in crime, we can expect to see them implement a negative Fed funds rate policy. Most people are unaware of this, but Fisher is a huge academic proponent of negative interest rates as a means to try and stimulate economic growth (Israeli-born, he was an economics professor at the University of Chicago and at MIT before going on to try and destroy the world with his ideas). Furthermore, Janet Yellen launched her bid to replace Bernanke with a speech in early 2012 advocating negative rates to stimulate employment.

For the record, negative interest rates are gold's rocket fuel.

Finally, I find it curious that very little attention has been paid to the fact that the Government is now operating until March 15, 2015 without any debt ceiling limit. Quite frankly, there should be outrage from both the media and the public. No one seemed to even notice. But letting the Government go for a year without ANY spending restraints is the equivalent of letting a multi-convicted pedophile operate a daycare center that has a sleepover option for parents who travel a lot.

In my view, unlike most mainstream investors, the smart money buying gold did happen to take notice of the unlimited credit card that Congress just gave the Obama Government. It actually became obvious last Friday to those few of us who do follow the news that affects our system that Boehner's House would pass a "clean" debt issuance extension. Since last Friday gold is up $57, or 4.5%. The GDXJ junior mining stock index is up 14%. In comparison, the S&P 500 is up 2.6%.

Things are going to start to really unravel in our economic and political system this year. As the underlying conditions deteriorate expect the Orwellian "things are getting better" lies to intensify. Try to enjoy what you can, while you can because life will likely become a lot more difficult for most of us this year.

Thursday, February 13, 2014

Based on analysis derived from physical gold delivery data on the Shanghai Gold Exchange - the world's biggest physical gold exchange - in January, a record amount of gold was imported and purchased/delivered in China last month: Chinese Gold Demand At All-Time High

Because the Comex can't print up physical gold and deliver it the way it prints up Comex gold futures contracts, the Fed/bullion banks are having trouble right now containing the price of gold. Rest assured, China will not buy Comex futures and wait for delivery OR leave its gold in U.S. vaults for safekeeping - just ask Germany how that has worked: U.S. Defaults On German Gold Deliveries

I wrote an article reviewing the Chinese gold demand data and why it will override the blatant U.S. manipulation of the gold market and push gold significantly higher this year: The Gold Bulls Are Starting To Run

When you factor in that the Indian Government may be forced politically to ease the gold import restrictions put in place last summer which severely limited the amount of gold India imported in the second half of the year, it makes my $2,000 price forecast for 2014 even more compelling.

The rest of the world outside of the zombified U.S. public is starting to understand the paper gold Ponzi scheme that the U.S. Fed/Govt has been operating for the better part of the last two decades in order to contain the price of gold, to support the reserve currency status of the dollar and to prevent a higher price of gold from signalling to the market that U.S. monetary and fiscal policy has failed - badly.

Monday, February 10, 2014

The only theory I can think of to explain this is that the smart money in the market is anticipating that the Fed will have to soon reverse itself and pump even more money into the banking system.

Although I was wrong that gold would fly when QE3 started - primarily due to the the Fed's price containment of gold (see today's earlier post) - I did say late last year that if the Fed did start to taper I would not be surprised to see gold start to chew threw the market obstacles being thrown at it by the Fed/bullion banks and move higher in anticipation of an eventual reversal of the taper. Janet Yellen is just person for that task given her stance on interest rates and "deflation fighting."

source: Zerohedge, with a few of my edits to clarify

A good friend/colleague called today wondering why the mining stocks were going nuts the past few days. Again, given that mining stocks are leveraged to the price of gold, market theory explains that stocks move ahead of the growth in their underlying source of profit - gold/silver in this case. I also averred that there's a massive short interest in mining stocks by hedge funds and that they are aggressively covering ahead of a possible upward explosion in the miners.

In fact, in the fund I manage, we had several holdings where were up double digits, with some of them outperforming the triple-leveraged mining stock ETFs: AAU +14.5%, Wildcat Silver up 17.9%, Exeter Resources (XRA) up 13% and ATAC Resources up 13.8%. Some of our holdings have more than doubled since early December.

I have suggested to a few colleagues that properly selected junior miners could end up returning 20-30x your investment at these levels. We've seen that occur in the past and now the big mining companies like Newmont and Goldcorp are starving to replace their reserves. A couple of the ones mentioned above have monster reserves and will eventually be swallowed up by the bigs.

Of course the gold and silver markets are manipulated. You have to be either blind or a Harvard Graduate with doctorate in Economics to ignore the fact. The purpose of the manipulation is the same as the purpose of the French Revolutionaries in attacking gold when they were printing their “Assignats” paper money like crazy; to try to suppress the indicator which showed the destruction they were carrying out with unlimited printing of fiat money. Gold tells the Truth and so it is an enemy of those who wish to deceive their populations. - Hugo Salinas Price, Mexican Billionaire and crusader for sound Government financial policy

Here's my latest article, co-authored with Dr. Paul Craig Roberts - detailing how the Fed/banks manipulate the price of gold using Comex paper gold futures as their conduit: Market Manipulations Become More Desperate

The outright lies and absurd propaganda streaming from the Government, the Fed and Wall Street are now reminiscent of the old Soviet Politburo and Pravda during the Cold War days. Remember that? You have to wonder exactly just how badly the system is collapsing behind the Capitol Hill "curtain" given the extent to which those in charge of the financial system are doing everything they can to prevent the markets from freely determining gold's free market price...

Thursday, February 6, 2014

Many of you probably do not recognize the name, Eric Holder. He's the Obama-appointed head of the Justice - or rather, "Justice" - Department. He's the scoundrel who penned the Marc Rich pardon letter signed by Clinton on his way out of the White House for the last time (and on his way to Denise Rich's 5th Avenue apartment for his "fee" to sign the letter). Marc Rich was the wealthy commodities trader who didn't think he should pay taxes so he fled to Switzerland to avoid enforcement of the law. I guess Eric Holder didn't think so either.

Most of you do know that, despite a rapid acceleration in Wall Street criminality and fraud, the Eric Holder/Obama Justice Department has seen a precipitous drop in financial crime prosecutions compared to the Bush years. Hard to believe this is the same presidential candidate who promised to clean up Wall Street and Capitol Hill.

This one may well take the gold medal for examples of just how corrupt system has become:

I guess instead of "hope and change," if Obama were running for a 3rd term his new marquee campaign slogan would be: "Pay us to commit the crime and don't do any time." I stand by my prediction in 2008 that Obama's presidency would go down in history as being even more despised by the public than his predecessor's. Judging from his approval ratings my call is looking pretty solid.

Wednesday, February 5, 2014

The distortion and perversion of the truth has reached new levels. What's going on right now is right out of Animal Farm. - The Golden Truth

Winston worked in the RECORDS DEPARTMENT (a single branch of the Ministry of Truth) editing and writing for The Times. He dictated into a machine called a speakwrite. Winston would receive articles or news-items which for one reason or another it was thought necessary to alter, or, in Newspeak, rectify. If, for example, the Ministry of Plenty forecast a surplus, and in reality the result was grossly less, Winston's job was to change previous versions so the old version would agree with the new one. "1984," George Orwell

Blame it on the weather! January auto sales released on Monday showed a precipitous decline in auto sales in January compared to January 2013. Of course the first words out of every analysts' mouth was "bad weather."

As it turns out; in order to seek the facts, I did some research on weather patterns across the country in January. Looking at just the facts, the average daily temperature in January for the top 10 cities by population was about same as the historical average. In fact, on the west coast (i.e. San Diego and L.A.) the weather was warmer than average.

Furthermore, just because there's a couple days of snow and cold weather in the northeast, that would not prevent someone who wants to buy a new car from waiting until a warmer day to shop ("aw gee, it's cold today and the roads are snowy so I'll wait til next month to buy a new car...").

If you look at the year over drop in car sales for December 2013/2012 and compare it to the year over drop for January 2014/2013, the decline was roughly 7x more for January than December. December had bad its fair share of bad weather days as well. Even if the weather affected sales a little, the huge relative decline for January reinforces my theme that the economy hit a wall in November and 2014 will see economic contraction.

You can read my brief article on car sales here: January Auto Sales: Another Big Drop Please note that January is one of the lowest seasonal months for car sales, but that's why the January 2014/2013 comparison is so significant - it washes away seasonality.

Just for the record, expect an insanely absurd jobs report on Friday. It seems that the Government's attempt to cover up the truth varies inversely with the degree to which the U.S. economy is collapsing.

Monday, February 3, 2014

We can ignore reality, but we cannot ignore the consequences of ignoring reality

- Ayn Rand

I would be remiss if I didn't acknowledge my humiliation over Denver's thorough beating yesterday by the Seattle Seahawks. My congrats to the team and its fans. They outplayed the Broncos in every phase of the game. It looked like the dog ate [coach] John Fox's homework on Seattle because he certainly can't blame Denver's demise on bad weather.

The economic data that's been released for December and January now appear to be confirming my view that the economy hit a wall in November. As I suggested here: Expect A Decline In Auto Sales Going Forward, auto sales would start to plummet this year. Based on today's auto sales report for January, I may be on the right track. Ford's sales were down 7.5%, GM down 12% and Chrysler was up 8%. Note that Chrysler's sells the least number of cars of those three. Toyota's sales dropped 7.2% and Volkswagon's fell 19%.

The bad weather excuse just does not hold water. What makes it even more absurd is the fact that private construction spending - i.e. housing and commercial real estate - increased a little in January. Wall Street analysts and financial media reporters want me to believe that the same weather across the entire country that didn't prevent outdoor construction spending prevented people from looking for new cars? Really? Just for the record, I bought a new (used Subaru WRX) in January and I was test-driving in 20 degree weather right after a big snow storm.

And what about the plummet in manufacturing? The ISM manufacturing index registered its biggest miss of expectations on record for January and the new order index plummeted the most since 1980: Bad Weather Inside? Is Wall Street going to explain to us that leaky factor roofs and broken heating systems prevented factories from operating during bad weather days in January? Well the Purchasing Managers manufacturing index also missed expectations and the sub-indices for new export orders and order backlogs slipped below 50, indicating a contraction. Hmmm...did bad weather prevent purchasing managers from picking up their office phone and placing new orders?

The truth is that the consumer is done. According to reports from insiders at Dell, they are getting ready to cut 15,000 from the workforce. Several major retailers are chopping heads and closing stores. JC Penny and Sears are fighting off bankruptcy. The economy is in big trouble and Wall Street wants us to believe that bad weather is the culprit. George Orwell is looking down on us from somewhere in the heavens with a giant grin on his face.

Friday, January 31, 2014

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. - Napoleon

I co-authored another article with Dr. Paul Craig Roberts about the extreme and illegal manipulation of the gold market by the Federal Reserve and why the Fed is manipulating the gold market. The key point in this is that for every US$ the price of gold rises, it takes away power from the U.S. Government.

Be patient if the article is slow to load - it seems to be getting swamped with hits from all over the world:

Wednesday, January 29, 2014

Predictably, Obama rolled another yet another of his Martin Luther King gospel speeches designed to mesmerize his dwindling supporters and admirers. But beneath the cloud of rhapsodic rhetoric carefully orchestrated to deflect attention from the facts is the same web of insidious lies and deception that has characterized his Presidency since he took office.

Aside from the colossal failure know as "Obamacare," I love the way Obama avoids reviewing the facts that matter. For instance, I must have missed this part, but total Treasury debt issued since he took office has increased by 70% from $10 trillion to $17 trillion. And it's about to go up again. Debt to GDP soared from below 100% to well over 100%. And that's using the rigged GDP numbers vomited out to us by the Obama Government. This is a State of the Union that mathematically can not persist and will result in a complete economic catastrophe for the middle class (middle class = anyone not rich enough to buy their own politician, means roughly 99.9% of the population).

How about persistent and growing long term joblessness? This is the segment that has been out of work for a couple years and has given up looking. These people are are not even counted as part of the labor force. Here's what that looks like:

(click on graph to enlarge)

This shows the number of people who have dropped out of the labor force since Obama took office. A little over 11 million. Eliminating that 11 million from the labor force is the exact reason that the calculated unemployment rate has declined. The unemployment rate is a deceitful statistic, not the truth. That 11 million is the number people who became dependent on Government support in one of many forms since Obama's inauguration. I'm not sure Obama really addressed that issue other than to say that he would set up some kind of task force to try and coerce companies who are currently cutting jobs by the thousands to replace them with the untrained people who haven't worked in a couple years. Sorry, that program will fail as badly as Obamacare has failed.

Speaking of which, anyone not asleep happen to catch Obama's order to Congress to fast track the latest global trade Bill - the Trans-Pacific Partnership (TPP) agreement? He of course cloaked this trade agreement in promises of more jobs for Americans and a great deal for our economy. But once again it's well-crafted Obama-speak for: "bend over America, here comes another big lie." The ensured passage of this deal has been heavily funded by the corporations who will benefit the most from it. You can read the sordid details and facts HERE, HERE and HERE. The reason Obama wants to jam this through is that his corporate overlords don't want pain in the ass Congressmen diluting the massive wealth transfer from the middle class to the big corporations by attaching pork and earmarks. It will also cost big business a lot more in political graft if they have to plunk a lot money into campaign coffers other than Obama's (yes, they are still contributing because he gets to keep any money in the campaign account that's not spent while in office - Clinton passed that law).

One of the most troubling aspects of that TPP deal is that it will enable the Too Big To Fail banks that were bailed out by Obama using taxpayer money to largely get around the financial regulations that were imposed by the Dodd Frank legislation and the so-called "Volker Rule." Obama made a big production out of specifically telling the country a few weeks ago that our financial system is "safe" now. Of course, like everything else he says, it's a complete lie.

Finally, Obama offered a nicely promoted plan to help the little guy not covered by a corporate or fat Government retirement plan to start his own tax-deferred savings account. This plan is more comical than Saturday Night Live at its best in the late 1970's. Actually, it's an outright appallingly pathetic proposal. First, 76% of the country lives paycheck to paycheck. The "little" guy doesn't have any money left over after buying food and paying for heating to put into savings - especially after his health insurance costs were doubled by Obamacare.

Even worse, the little guy, to the extent he might have some extra money left over for savings, is forced by Obama to buy Treasury bonds. He doesn't get the investment choices offered to everyone lucky enough to work for a big corporation or the Government. Who the heck wants to invest in Treasury bonds? After inflation, the return on Treasury bonds is negative. It's really a way to shift even more of the Government debt burden onto to the backs of the middle class.

As IF all of the above isn't enough, Obama's biggest promise is that he's going to take the Government into his own hands if Congress doesn't do what he wants them to do. I remember very vividly when Obama was engaging in campaign debates with his opponent in 2008 that he promised vehemently to get rid of earmarks and not use Executive Orders. Well, it turns out, Obama likes Executive Orders and he wants to keep Executive Orders. Rest assured, unless the White House cuts Congress in on all of the big corporate graft being passed out liberally, we are going to see Obama transform the Executive Branch of Government into essentially a dictatorship.

In blowing away the rhythmically delivered smoke from Obama's teleprompter delivered speech last night, you can see that it was a carefully and methodically crafted bundle of lies and deceit. The truth is, and this is the truth that even his marginally supportive constituents refuse to look at, is that Obama is probably the most insidiously deceitful President in the history of the country. He heralded himself as the Great Savior of the middle class and Constitutional Government. Ironically, he'll go down in history as the guy who led the U.S. into the abyss of totalitarianism and economic demise.

Other than all that, Mrs. Lincoln, did you enjoy "Our American Cousin?"

Tuesday, January 28, 2014

I was looking forward to the week's trek into Sunday's Super Bowl, but I'm already fatigued and disgusted with the media spectacle this week has become. I don't really care what Petyon Manning listens to in his car on his way to the playing field and I'm bored senseless with the anticipation of Richard Sherman uttering something absurd.

I have Denver winning by 10 again. Jim Rome has Denver winning by three touchdowns but he's overlooking the fact that Denver's defensive coordinator, Jack Del Rio likes to take a big lead in the fourth quarter and turn it into a nail-biting race to time expiring. In both playoff games his defense held San Diego and New England to a combined 3 total points nearly halfway through the 4th quarter of each game. Then he switches into that moronic "prevent" defense that coaches like to use to prevent their team from putting away games or even winning.

Even though Denver will win, that defense Jack Del Rio uses in the 4th quarter leads to a victory that's the equivalent of Warren Buffet declaring "victory" when he removes his Depends and goes half a day without soiling himself.

I base my 10-point margin on two "X" factors being overlooked by every game analyst. The first one is Champ Bailey. Lost in the spotlight shining on Seattle's Richard Sherman is likely first-ballot Hall Of Fame inductee, Champ Bailey. When Richard Sherman can say that he's gone to 12 Pro Bowls in 15 years, then I'll have some respect for him.

He's not the same Champ as five or six years ago, but he's missed most of the season due to a nagging foot injury and now he's back at 100% and has fresh legs. You didn't hear his name much against New England, which is a good thing because it means he was shutting down his receiver assignment in man-to-man coverage. "Smart" doesn't get old. That means Denver has two "lock-down" cornerbacks - the other is Dominque Rogers-Cromartie - which enables Denver to focus on stopping the run. They held San Diego and New England both to under 70 yards rushing.

The other "X" factor is something that I won't reveal until after the game. It's not a player and it's not a weather-related factor. If anyone wants to email me with what they think it is, I'll acknowledge correct answers. It is something that this year's team has in common with Denver's two back-to-back Super Bowl wins and it isn't John Elway...

Monday, January 27, 2014

Apple stock plunged $46 - 8% - in after hour trading this afternoon after releasing its 1st quarter fiscal year earnings. It's irrelevant whether or not they beat estimates because the estimates are rigged by Wall Street analysts to be beaten anyway. It lowered its outlook for 2014 and that was relevant. The net-net of it is, as I've been saying ad nauseum, the consumer is dying on a vine.

There's a lot of mutual and hedge funds who are highly overweighted in AAPL stock. Unless the Fed intervenes heavily tonight and tomorrow in the futures markets, the rest of this week could get ugly for the stock market. In addion, the NYSE released monthly margin debt numbers for November and it showed a new all-time high for margin debt, by a considerable amount. Historically market peaks occur when investor margin debt goes parabolic, which it has.

I have been warning anyone willing to listen that this is the most overvalued market in the history of this country, especially if you adjust earnings by using the GAAP accounting standards that were enforced 20 years ago. My advice is to sell now and get your money out of the system as much as possible. It won't be long before there's a stampede for the exits...foretold is forewarned.

December existing home sales were released last week by the National Association of Realtors. Despite the happy headline report of a 1% gain over November, when you factor in the nearly 6% downward revision of November's previous reported result and look at the 6-month trend in existing home sales, the market is clearly headed back down into the bear trend that started in mid-2005.

Two specific points of data that I found the most troubling for housing market hopefuls: If you look at the rate of decline in homes sales for the entire 4th quarter of 2013, Q4 was down over 27% from the fourth quarter of 2012 and nearly 8% from the third quarter of 2013. That's something you will not see reported by the media or Wall Street. I guarantee you that Obama will not talk about that fact in his State of Disaster speech tomorrow night.

The biggest factor that everyone is overlooking is that the consumer is dead in terms of ability to spend over and above necessities. Real disposable income is declining and people in general do not have much left over after paying for daily necessities plus the much higher than advertised cost of Obamacare.

One more point, I predicted last quarter that we would start to see a lot more "for sales" signs pop up in January despite the fact that the real listing/selling season doesn't get started until March. Anecdotally judging from what I'm seeing everywhere I drive in Denver, my prediction is correct. I really noticed it this past weekend.

FYI, anyone holding onto stock market positions is hereby officially forewarned to get out now. It's going to get ugly. The trade that drove the SPX up at a near-parabolic rate last year and drove gold lower is going to unwind. Don't listen to Wall Street. Wall Street's only job is to take money from your pocket and put it in their's. Just like stocks shocked people to the upside in 2013, gold is going to shock even more people this year with its move higher.

Friday, January 24, 2014

Earlier this week 30-day/4-wk T-Bills were auctioned off a 0% rate. Intra-day, after the auction, the rate went negative. Negative short term rates were last observed in 2008, before the Lehman/AIG/Goldman collapse occurred. Of course, Lehman was allowed to implode and Goldman, who's ex-CEO was the Treasury Secretary, was bailed out. AIG was the beneficiary of that bailout because Goldman had impaled itself on AIG nuclear waste.

The point here is that negative T-bill rates only occur when very big investors are concerned about the return OF their money and not the return on their money. Think about what a negative T-bill rate means. It means that someone is paying more for the T-bill than they get in return when it matures a few weeks later. Why would someone do that? It's the "safest" place to park large sums of cash.

A big institutional fund or very wealthy investor pays for a T-bill because they they see something which indicates that the risk of the Government defaulting in the next four weeks is less than the risk of parking that money in a bank or a money market fund. We're talking millions and tens of millions in short term money. Bank deposits are insured only up to a small amount. After 2008, it has been decided that money market funds will no longer be bailed out by the Government/Fed.

In other words, big big investors with cash that needs to be parked are seeing something that gives them concern about the financial system. The negative rates on T-bills means that whatever was spooking big money in 2008 is spooking it again. My best guess right now is that there is massive risk of derivatives default. This would be the derivatives that blew up the system in 2008 but that the Fed/Government quickly monetized. The problem was never fixed, contrary to Obama's recent end zone dance on the safety of the banking system.

In fact, the Fed swallowed a portion of the bad derivatives and has been using the better part of the $85+ billion per month it's been printing since early 2009 to monetize the rest. In other words the catastrophic problems were kicked down the road. Worse, the big banks went out and replaced the crap the Fed took off their balance sheets with even more crap. Accounting rules were changed, and ratified by BOTH political parties plus Obama, which enabled the big banks to hide the problem.

But now the financial system is wearing the Scarlet Letter of negative T-bill rates. The source that is lighting the fuse is emerging market problems, reflected in the currency devaluations by Argentina and Venezuela. But the currencies of other important emerging market economies have been plunging against the dollar as well. The cost of derivatives "insurance" on the sovereign debt of these countries has suddenly increased at a rate that would make Obamacare insurance providers blush.

What the currency plunge/derivatives blow-out implies is that sovereign bond defaults are on the horizon. This is not just confined to "emerging" economic countries. Spain, Portugal, Italy and France are on the ropes financially and economically as well, despite the official European story-line that Europe is in "recovery."

The issue for the U.S. here is that the Too Big To Fail banks are the ones who have underwritten most of the credit insurance derivatives associated with the sovereign debt that may be at risk to default. They also hold a lot of it on their balance sheet. That's why the Fed's Excess Reserve accounts of the big banks have ballooned up in correlation with amount of QE that has been printed. The Fed has monetizing the derivatives exposure but that works only up to the point of a default event.

In other words, a big nuclear derivatives may be coming at our system. Another interesting tidbit to think about. While the paper price of gold was being plunged using Comex futures by the Fed-backed big banks, a major portion of the gold held in the GLD Trust was removed. The common narrative scooped up like dog crap and tossed in our face by Wall Street analysts was that the decline of the gold in GLD was indication of a new bear market in gold.

Essentially gold bottomed in price on June 28th, with a retest of that bottom at the end of December. Based on the $1180 bottom, gold has risen $90 since since the end of June. But guess what? Another 179 tonnes of gold - or 19% - of the amount of gold in the GLD trust at the end of June has disappeared. If gold is rising again, shouldn't gold be flowing back into GLD? The 500+ tonnes of gold that has been removed from GLD in a little over a year has disappeared down the rabbit hole. There's no way to know for sure but I'm sure a large portion, if not all, has been shipped to China.

But maybe not all of it. In addition to the huge ratio of paper gold to physical gold visible on the Comex, according to the latest OCC bank derivatives report the top 4 banks - JPM, Citi, Goldman, Bank of America - are long over $81 billion in gold OTC derivatives. That's the equivalent of about 1800 tonnes of gold at current at the current price. 1800 tonnes is slightly less than than the annual amount produced globally by gold mines. That amount dwarfs by many multiples the ratio of paper/gold on the Comex that has drawn everyone's attention. Maybe that's why the Comex publishes as much data as it does about Comex futures positions and inventory. It draws everyone's attention from the much bigger gold derivatives problem.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.